Meng v. Schwartz

• Decision Date: 06 February 2004
• Docket Number: No. CIV.A. 01-1715.,CIV.A. 01-1715.
• Citation: 305 F.Supp.2d 49
• Parties: W.L. MENG, et al., Plaintiffs, v. Bernard SCHWARTZ, et al., Defendants.
• Court: U.S. District Court — District of Columbia

305 F.Supp.2d 49

W.L. MENG, et al., Plaintiffs, v. Bernard SCHWARTZ, et al., Defendants.

No. CIV.A. 01-1715.

United States District Court, District of Columbia.

February 6, 2004.

COPYRIGHT MATERIAL OMITTED

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Larry Elliot Klayman, James F. Peterson, Paul J. Orfanedes, Judicial Watch, Incorporated, Washington, DC, for Plaintiffs.

John Joseph Halloran, Jr., Speiser Krause, Arlington, VA, David P. Murray, Willkie, Farr & Gallagher, LLP, Joseph E. Sandler, Sandler, Reiff & Young, P.C., Robert Felix Bauer, Marc Eric Elias, Perkins, Coie, LLP, David Evan Kendall, Williams & Connolly, Mary Hampton Mason, Department of Justice, Steven Mark Salky, Zuckerman, Spaeder, LLP, John Christopher Keeney, Jr., Hogan & Hartson, L.L.P., Washington, DC, for Defendants.

MEMORANDUM OPINION

LAMBERTH, District Judge.

Now before the Court are the defense motions to dismiss the Plaintiffs' Amended Complaint.¹ Specifically before the Court are Defendants Democratic National Committee (hereinafter "DNC"), DNC Services Corporation (hereinafter "DNC Services"), Democratic Senatorial Campaign Committee, Inc. (hereinafter "DSCC"), and Democratic Congressional Campaign Committee, Inc's (hereinafter "DCCC") Motion To Dismiss For Failure To State a Claim Upon Which Relief Can Be Granted; Defendants Albert Gore, Jr., Samuel R. Berger, Alexis Herman, Harold Ickes and Melissa Moss' Motion To Dismiss; Defendant John Huang's Motion To Dismiss the Amended Complaint; Defendant Marvin Rosen's Motion To Dismiss the Amended Complaint; Defendants William J. Clinton and Hillary R. Clinton's Motion To Dismiss the Amended Complaint; and defendant Bernard Schwartz's Motion to Dismiss the Amended Complaint. Also before the Court are the Plaintiffs' Oppositions To All Motions To Dismiss and the Defendants' Reply Memoranda to the Plaintiffs' Oppositions.

Upon consideration of the foregoing motions, the applicable law, and the record in this case, the Court will GRANT the Defendants' Motions to Dismiss for the reasons stated herein.

BACKGROUND

The plaintiffs are shareholders of defendant Loral Space and Communications, Ltd. (hereinafter "Loral Space"), and respectively reside in Virginia and Maryland. The plaintiffs allege that defendant Bernard Schwartz, Chairman of the Board and Chief Executive Officer of defendant Loral Space, made unlawful campaign contributions to the Clinton Administration and various democratic organizations in exchange for favorable trade policies, and then sought and obtained reimbursement from Loral Space for the amount of the unlawful contributions. The plaintiffs maintain that this conduct gives rise to four causes of action, namely: (1) breach of fiduciary duty; (2) negligence; (3) civil conspiracy; and (4) unjust enrichment.

The plaintiffs first made allegations similar to those in the instant complaint in a prior action filed on November 24, 1998 (hereinafter "Meng I"). The Meng I complaint named over fifteen defendants, including Loral Space, Loral Space CEO Bernard Schwartz, President Bill Clinton, Vice President Al Gore, the Democratic National Committee, Hillary Rodham Clinton, Harold Ickes, Melissa Moss, Alexis Herman, Marvin Rosen, Samuel Berger, John Huang, the Democratic Senatorial Campaign Committee, the Democratic Congressional Campaign Committee, several John and Jane Does, and Terrence R. McAuliffe.

Based on the same conduct alleged in the instant complaint, the Meng I complaint invoked the Court's federal question jurisdiction, alleging a count under the federal civil Racketeer Influenced Corrupt Organization statute (hereinafter "RICO") and attaching four pendant state law claims of breach of fiduciary duty, negligence, civil conspiracy, and unjust enrichment. In response to the Meng I complaint, the defendants filed motions to dismiss, essentially maintaining that even if the defendants committed the alleged RICO violations, the plaintiffs could not prove, under any set of facts, that those violations proximately caused their purported harm.

On September 25, 2000, relying on the RICO statute requirements, the Supreme Court's interpretation of the RICO causation standard in Holmes v. Securities Investor Protection Corp.,² and the Second Circuit's distillation of Holmes,³ this Court dismissed the plaintiffs' federal RICO count for failure to state a claim pursuant to Rule 12(b)(6) upon finding that the defendants' alleged RICO violations were not the proximate cause of the plaintiffs' alleged injuries. See Meng v. Schwartz, 116 F.Supp.2d 92, 97 (D.D.C.2000). The Court then dismissed the remaining supplemental claims for lack of subject matter jurisdiction, without prejudice, pursuant to Fed.R.Civ.P. 12(b)(1) and 28 U.S.C. 1367(c). See id. See also Meng v. Schwartz, 116 F.Supp.2d 92 (D.D.C.2000) (Judgment).

On October 10, 2000, the plaintiffs moved, pursuant to Fed.R.Civ.P. 59(e) and Fed.R.Civ.P. 60(b), to alter or amend the Court's judgment, attempting to dismiss Terence R. McAuliffe in an effort to establish diversity jurisdiction. On July 9, 2001, the Court denied the Plaintiffs' 59(e) and 60(b) motions upon finding that the prior judgment was neither incorrect nor unjust as required under the rules. The Court also noted that despite the pragmatic arguments propounded by the plaintiffs in support of their decision to file Rule 59(e) and Rule 60(b) motions, the plaintiffs could have simply invoked the Court's jurisdiction over its state law claims by omitting Terrence R. McAuliffe from a newly filed complaint and otherwise properly pleading diversity jurisdiction. See Meng v. Schwartz, 98-2589 (D.D.C. July 9, 2001) (Memorandum and Order). On September 10, 2001, the plaintiffs filed the instant case against the same group of defendants, save Terry R. McAuliffe, invoking the Court's diversity jurisdiction.

The plaintiffs also appealed Meng I, and the D.C. Circuit upheld the decision in Meng I for substantially the same reasons given by this Court. See Meng v. Schwartz, 48 Fed.Appx. 1, 2-3, 2002 WL 31248491 (D.C.Cir.2002). In upholding this Court's decision in Meng I, the D.C.Cir. agreed that the plaintiffs failed to state a claim upon which relief could be granted because they could not establish that the defendants' alleged activities proximately caused their injuries. See Meng, 48 Fed.Appx. at 2-3. In addition, the D.C.Cir. held that prior litigation before a New York State court,⁴ which fully and fairly litigated the bonus payment issue, precluded relitigation of the bonus payment/reimbursement issue in the plaintiffs' case. See id. On November 21, 2002, the plaintiffs petitioned for a rehearing, which the D.C.Cir. denied on December 23, 2002.

As just mentioned, on September 10, 2001,⁵ the plaintiffs filed the instant shareholder derivative action pursuant to Rule 23.1 for recovery by and on behalf of Loral Space. With the exception of the federal RICO claim and the naming of Terrence McAuliffe as a defendant, the instant action was filed by the same plaintiffs, asserts the same facts, alleges the same counts and names the same parties as in Meng I.

Specifically, the four counts alleged in the instant complaint are: (1) breach of fiduciary duty as to defendant Schwartz; (2) negligence as to defendant Schwartz; (3) unjust enrichment as to defendants DNC, DSCC, and DCCC; and (4) civil conspiracy as to all of the defendants. In aggregate, the defendants move to dismiss the instant action pursuant to Rule 12(b)(1), maintaining that this Court does not have subject matter jurisdiction over the instant action because the plaintiffs have failed to establish complete diversity. The defendants also move to dismiss the plaintiffs' action pursuant to Rule 12(b)(6), maintaining that: (1) res judicata bars the action in its entirety; (2) collateral estoppel precludes relitigation of each count alleged in the complaint; (3) the counts alleged in the action are time-barred; and (4) the plaintiffs fail to meet the requirements of Rule 23.1 certification.

I. Dismissal For Lack Of Subject Matter Jurisdiction

For the reasons stated below, the Court dismisses the plaintiffs' action for lack of subject matter jurisdiction pursuant to Rule 12(b)(1).

The plaintiffs assert that this Court has subject matter jurisdiction over their claims pursuant to 28 U.S.C. § 1332, which permits federal district courts to exercise jurisdiction over actions that lie in diversity. See 28 U.S.C. § 1332. The defendants maintain that the Court lacks subject matter jurisdiction because the plaintiffs have failed to demonstrate complete diversity of citizenship, and, therefore, move to dismiss the plaintiffs' complaint for lack of subject matter jurisdiction.

Pursuant to Rule 12(b)(1), a district court should dismiss an action for lack of subject matter jurisdiction when the facts and allegations before the court belie the plaintiffs' averment that federal jurisdiction exists. See Fed.R.Civ.P. 12(b)(1). In the case of an action invoking a court's diversity jurisdiction under § 1332, it is the invoking party's burden to show that: (1) complete diversity exists; and (2) the claim in good faith exceeds $75, 000. See Tavoulareas v. Comnas, 720 F.2d 192, 195 (D.C.Cir.1983.); Group Hospitalization and Medical Services, Inc. v. Richardson, 946 F.Supp. 50, 52 (D.D.C.1996) (citing Cameron v. Hodges, 127 U.S. 322, 8 S.Ct. 1154, 32 L.Ed. 132 (1888)). The requisite jurisdictional amount must be met by each plaintiff, and complete diversity must be established upon a showing that each plaintiff has a different citizenship from each defendant. See Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 374, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978). For the purposes of establishing complete diversity under § 1332, the citizenship of every party to the action must be distinctly alleged and cannot be established presumptively or by mere inference. See Charles A. Wright, Miller & Cooper, Federal Practice and Procedure § 3605 (3d...